EconPapers    
Economics at your fingertips  
 

Stagnation traps

Gianluca Benigno and Luca Fornaro

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full employment because weak growth depresses aggregate demand and pushes the interest rate against the zero lower bound, while growth is weak because low aggregate demand results in low profits, limiting firms' investment in innovation. Policies aiming at restoring growth can successfully lead the economy out of a stagnation trap, thus rationalizing the notion of job creating growth.

Keywords: Secular Stagnation; Liquidity Traps; Growth Traps; Endogenous Growth; Multiple Equilibria. (search for similar items in EconPapers)
JEL-codes: E32 E43 E52 O42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pke
Date: 2015-01, Revised 2017-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
https://econ-papers.upf.edu/papers/1487.pdf Whole Paper (application/pdf)

Related works:
Journal Article: Stagnation Traps (2018) Downloads
Working Paper: Stagnation traps (2017) Downloads
Working Paper: Stagnation traps (2017) Downloads
Working Paper: Stagnation Traps (2016) Downloads
Working Paper: Stagnation Traps (2016) Downloads
Working Paper: Stagnation traps (2016) Downloads
Working Paper: Stagnation traps (2016) Downloads
Working Paper: Stagnation Traps (2015) Downloads
Working Paper: Stagnation Traps (2015) Downloads
Working Paper: Stagnation Traps (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1487

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ().

 
Page updated 2019-05-22
Handle: RePEc:upf:upfgen:1487